CONCORD — Public Service of New Hampshire now appears willing to discuss divestiture of its coal-fired power plants with the Public Utilities Commission, even as it appeals the PUC's authority on the matter to the state Supreme Court.

In a series of seemingly contradictory moves, the regulated utility in the past week demonstrated new flexibility on the question of its coal-fired plants, while at the same time challenging the PUC's jurisdiction.

The PUC has for months been engaged in hearings on the $422 million project to install mercury control systems at the Merrimack Station coal-fired plant in Bow. At issue is the question of whether PSNH proceeded with prudence in having the scrubbers installed, and how much of the cost should be passed along to ratepayers.

In an appeal to the Supreme Court filed on Sept. 25, the utility challenges previous PUC orders on the subject and asks the high court to rule on whether the PUC has the authority to override legislative mandates that led to the scrubber installation.

Through its appeal to the Supreme Court, the utility suggests that the question of divestiture will ultimately have to be decided by the state Supreme Court, so it might as well decide now.

In 2006, the Legislature ordered that the pollution control devices be installed at Merrimack Station. According to the PSNH appeal, "From 2008 through 2012, the PUC issued multiple decisions expressly finding that PSNH was required to build the scrubber."

The appeal notes that in 2009 and again in 2011, the Supreme Court itself described PSNH's obligation to build the scrubber as a mandate.

"Now, nearly two years after the scrubber was completed, the PUC has concluded that installation of the scrubber was not mandated, that it has the authority to determine whether PSNH failed to exercise prudent management discretion by building the scrubber," the appeal claims. "The PUC's actions are so arbitrary and capricious that they deny PSNH due process of law and have turned this matter into a political football."

The PUC consumer advocate, Susan Chamberlain, says the case is not so clear-cut.

"The state made a law and the company had to comply and make its best effort," she said, "but the company also has an obligation not to spend money foolishly and to monitor the marketplace, and to monitor everything that would have an impact on their rates, and keep the Legislature and PUC informed. They didn't do that. You can argue if they had done that, the decisions would have been different."

She said the PUC hasn't even issued a final ruling, and expressed skepticism that the high court would take an appeal on a decision not yet rendered.

"The Supreme Court may in its discretion decline or accept an appeal of an order of an administrative agency, or may summarily dispose of such an appeal," she said. "But we don't have a final order. I don't think this (appeal) has much of a chance of success, but we're still trying to puzzle through how to respond to it."

Sending mixed signals?

A governmental affairs representative from PSNH recently met with lawmakers to discuss a way out of the deadlock, triggering speculation at an energy conference in Concord on Monday that the PSNH position is shifting.

"There's no change in our position regarding divestiture," said PSNH spokesperson Martin Murray. "We don't think it's a good idea. The conversation was an acknowledgement that we know the Legislature is very interested in this subject. If there is to be a discussion on the issue of divestiture, the benefits of our regulated power generation and the possible cost of divestiture, the proper venue is the PUC."

When asked how the utility could say the proper venue for such a discussion is the PUC, while challenging the PUC's authority in court, Murray said the court case is focused on a narrow issue — cost recovery.

"With our appeal to the court, we are talking about what the PUC has said and done specifically with cost recovery associated with the scrubber," he said. "When you're talking about the larger issue of the benefits of PSNH (coal-fired) generation to the state, the forum should be the PUC."

State Sen. Jeb Bradley, who met with the PSNH governmental affairs representative, said it's possible the Supreme Court case has been filed in anticipation of divestiture.

"I think what's going on here is they (PSNH) are laying down a marker on the recovery of costs," he said. "If they do move forward with divestiture, they expect to recover every penny from the sale of the assets."

Given the history of the scrubber installation and the aggressive way in which PSNH promoted the idea, Bradley said he hoped the costs could be split among PSNH shareholders and customers.

"It's been characterized as a mandate, but I think it was more of a partnership," he said, "because everyone including PSNH supported it. When we talk about cost recovery, there should be some sharing of that burden."dsolomon@unionleader.com

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